PURCHASE ORDER PPT FOR BBA AND MBA STUDENTS

PURCHASE ORDER PPT FOR BBA AND MBA STUDENTS

1. Purchase Order Pooja Gupta Singla

2. After the requisition has been approved , the purchasing department places ord er. For routine purchases, the order is usually sent through established sources of supply ; in other cases, the purchasing department may ask for bids or send out requests for quotations before placing order. A purchase order is a written request to a supplier for specific goods at an agreed price . The request also stipulates terms of delivery and terms of payment. The purchase order authorizes the supplier to deliver goods and submit a bill . To provide control over issuance the purchase order, they are serially numbered. Introduction

3. The original order is sent to the supplier (to place order). Copies of the purchase order usually go to the : Accounting department ( to be used in checking the supplier’s invoice when a voucher is being prepared for payment, and for future recording in purchase journal and the general subsidiary ledgers) Receiving department (to alert them to expect a delivery),and Credit/finance department (for eventual payment within the discount period) A copy is retained by the purchasing department to maintain a file of all purchase orders issued. Cont.

4. The authority for the Purchase Department to make purchases is the purchase requisition. No material shall be purchased without a duly authorized purchase requisition. On receipt of the purchase requisition the Purchase Department will find the right source of supply and the price. After the selection of the supplier, the purchase order is prepared. The purchase order is a legal document or contract for purchasing goods by one party from another at a certain price. A specimen of a purchase Order is shown in Form 14. Introduction

5. Name and address of the company placing the order. Purchase order number Name and address of the supplier Order date; delivery date requested, delivery and payment terms. Quantity of items ordered Catalogue number Description, unit and total price All types of costs like shipping, handling etc Total cost Authorized signature Contents in Purchase Order

6. Supplier’s name and address :- These should be clear and complete to avoid postal errors. Consignee’s name and address :- Full name and address of the consignee , especially when the purchaser is not the consignee, should be given. Terms and conditions :- A set of terms and conditions is shown in Form 14. It is usual to print the terms and conditions on the back of the order but a not to this effect must be made on the face of the order above the signature by remarks such as “this order is placed subject to the terms and conditions printed on the reverse.” Form 14

7. Description :- The description should be clear and should specify the quality of the material required such as standard specification, brand name, drawing number, manufacturer, or suppliers’ reference number etc. Quantity :- The quantity stated should be precise and should leave no room for ambiguity. It should also tally with the pricing unit such as, each, pair, tones etc. if the terms such as drums, bags etc., are used, the quantity per drum, bag etc., should be stated in bracket. Quotation reference and date : The reference number and date of supplier’s quotation will be shown in these columns. Where repeat order is placed, previous order reference will be given.

8. Price terms : These include unit price, pricing unit discount if any and whether sales tax is payable or not. In very exceptional cases, open orders worded “ at lowest rates” may be placed. The estimated cost, however, may be shown on the purchase and Account copies for accounting and statistical purposes. (The invoices in such cases will be certified by the purchase department) Total value :- In certain firms the total value is not shown on the purchase order apparently to save the time of calculation. However, mentioning the total value has an advantage that it induces the various persons connected with the scrutiny of the order particularly the person signing it to give a second thought as to whether the order quantity should be cut down, whether delivery can be staggered, whether the order is being placed on a reliable party, whether comparative quotations are satisfactory, etc.

9. Delivery date :- When a material are required by a time limit, a definite delivery date should be given on the purchase order. Term such as " Immediate" and "urgent" are not only vague but make it legally difficult to cancel an order on account of delay in delivery. For special purchases, the delivery date should, as far as possible coincide with the date by which the materials are required by the intendor . For recoupment purchases, the delivery date will be indicated on the recoupment purchase requisition by Stock Control. Where, however, the suppliers have given a different time limit for delivery, the delivery date should be altered accordingly when placing the order unless this can be improved upon by negotiation. In the case of bulk orders, the quantity required at various intervals should be indicated.

10. Packing : If packing is free or extra, this must be stated in the order. Normally, the suppliers have their own standard packing. Where special packing is required, necessary instruction must be incorporated in the order. Case markings : If the packing case should bear any special marks, these should be clearly shown. Shipping instructions : These will include mode of dispatch i.e., whether by steamer,air,goods train , passenger train, road transport or parcel post and the destination, i.e., name of port, railway station or the post office to which the goods are to be sent.

11. Freight : Whether goods should be sent freight paid or freight to pay . Inspection : Very often, orders are placed subject to inspection of materials by the buyer's organization before or after delivery. The order should contain a note to this effect such as "goods are to be inspected by our staff before delivery" or "goods will be subject to inspection and rejection at our works". A rubber stamp may be used for this purpose.

12. Insurance : Whether insurance will be arranged by the supplier or buyer and in the later case, to whom the shipping details such as name of steamer or railway receipt number, number of cases, value etc., should be communicated for fulfilling insurance formalities. Invoice instruction : This should include number of copies of invoices to be sent, to whom to be submitted, whether purchase order copy should be attached or not. Mode of payment : Whether the invoice should be sent through the bank or should be submitted to the accounts department.

13. Order Creation : Allows users to create purchase orders by specifying details such as items or services needed, quantities, prices, delivery dates, and supplier information. Supplier Management : Enables users to maintain a database of suppliers, including contact information, payment terms, lead times, and performance metrics. Some systems may also include supplier evaluation and rating features. Approval Workflow : Supports customizable approval workflows for purchase orders, allowing designated users to review and approve orders based on predefined rules and thresholds. This helps ensure compliance with purchasing policies and budgetary constraints. Integration : Integrates with other business systems such as inventory management, accounting, and ERP systems to facilitate seamless data exchange and process automation. Features of Purchase order processing

14. Electronic Data Interchange (EDI) : Supports EDI standards for electronic exchange of purchase order data with trading partners, enabling automated order processing and reducing manual data entry. Document Management : Provides document management capabilities for storing, organizing, and retrieving purchase orders, invoices, contracts, and other related documents electronically. Real-Time Tracking : Offers real-time tracking and monitoring of purchase orders throughout the procurement lifecycle, from creation to delivery and invoicing. This helps stakeholders stay informed about the status of orders and anticipate potential delays or issues. Inventory Integration : Integrates with inventory management systems to track inventory levels, reconcile purchase orders with stock levels, and generate reorder alerts when inventory falls below predefined thresholds. Reporting and Analytics : Provides reporting and analytics tools for generating insights into purchasing trends, supplier performance, spending patterns, and other key metrics. This supports data-driven decision-making and continuous improvement in procurement processes.

15. Streamlined Ordering Process : Purchase order processing helps streamline the ordering process by providing a standardized format for requesting goods or services. This reduces the likelihood of errors and miscommunications. Improved Accuracy : Using purchase orders ensures that both parties have a clear understanding of the items, quantities, prices, and delivery dates agreed upon. This reduces the risk of mistakes in orders and invoicing. Better Inventory Management : Purchase orders provide valuable data for inventory management. By tracking orders through the purchase order process, businesses can optimize stock levels, reduce excess inventory, and avoid stockouts . Benefits of Purchase order processing

16. Manual Purchase Order Processing : This is the traditional method where purchase orders are created, reviewed, and approved manually using paper-based forms or electronic documents like spreadsheets or word processors. While it's straightforward, it's also prone to errors and delays. Electronic Purchase Order Processing : In this method, purchase orders are created and managed using electronic systems or software. This could include dedicated procurement software, enterprise resource planning (ERP) systems, or specialized e-procurement platforms. Electronic purchase order processing typically offers more efficiency, accuracy, and integration with other business processes. Automated Purchase Order Processing : Automation involves using software and algorithms to handle repetitive tasks involved in purchase order processing, such as data entry, approval routing, and notifications. Automation can significantly reduce processing times, improve accuracy, and free up staff for more strategic tasks. EDI (Electronic Data Interchange) : EDI involves the automated exchange of purchase order data between trading partners' computer systems in a standardized electronic format. This streamlines the purchasing process, reduces manual data entry errors, and accelerates order fulfillment. Typesof Purchase order processing

17. Customer Satisfaction: Efficient order processing ensures that customers receive their orders accurately, promptly, and in good condition. By providing a seamless ordering experience, businesses can enhance customer satisfaction, loyalty, and retention. Timely Fulfillment: Order processing facilitates the timely fulfillment of customer orders, meeting delivery deadlines and expectations. Prompt order processing helps businesses avoid delays, backorders, and stockouts , thereby improving customer service levels. Inventory Management: Order processing is closely linked to inventory management. By accurately tracking inventory levels and processing orders in real-time, businesses can optimize stock levels, reduce carrying costs, and minimize the risk of overstocking or stockouts . Importance of order processing

18. Revenue Generation: Order processing directly impacts revenue generation by enabling businesses to convert customer orders into sales. Streamlined order processing workflows help businesses capture sales opportunities, maximize order value, and drive revenue growth. Operational Efficiency: Efficient order processing streamlines internal operations, reduces manual errors, and minimizes administrative overhead. Automation and integration of order processing systems improve operational efficiency, allowing businesses to handle higher order volumes with fewer resources. Cost Control: Effective order processing helps businesses control costs associated with order fulfillment, inventory management, and customer service. By optimizing workflows, reducing order processing times, and minimizing errors, businesses can lower operational expenses and improve profitability. Data Insights: Order processing generates valuable data that can be analyzed to gain insights into customer behavior, sales trends, and operational performance. By leveraging this data, businesses can make informed decisions, identify opportunities for growth, and address challenges proactively. Compliance and Accuracy: Order processing ensures compliance with regulatory requirements and industry standards related to order fulfillment, invoicing, and customer communication. Accurate order processing helps businesses maintain legal and financial compliance and build trust with customers and stakeholders.

19. Competitive Advantage: A well-executed order processing system can provide a competitive advantage by differentiating businesses based on service quality, reliability, and responsiveness. Positive customer experiences resulting from efficient order processing can help businesses stand out in the market and attract new customers. Brand Reputation: Smooth and reliable order processing contributes to a positive brand reputation. Customers associate brands with their ordering experiences, and businesses that consistently deliver on their promises and exceed expectations build a strong reputation for reliability and trustworthiness. In summary, order processing is essential for driving customer satisfaction, operational efficiency, revenue growth, and competitive advantage. Businesses that prioritize order processing and invest in robust systems and processes can better meet customer needs, optimize resources, and achieve long-term success.